Provisions push banking sector earnings down 97% in Q1
Consolidated net earnings of the Hungarian banking sector reached HUF 3 billion in Q1, dropping to just 2.7% of the HUF 125 bln figure a year earlier because of large write-offs and provisioning against the impact of the coronavirus pandemic, state news wire MTI reports, citing data released by the National Bank of Hungary (MNB).
Image by Shutterstock.com
In addition to the immediate effect and general uncertainties over prospects of the pandemic, a government-mandated moratorium on repayments of loans, in effect until the end of 2020, hit the bottom line.
The sectorʼs net interest revenue was up 14.7% at HUF 348 bln and net revenue from commissions and fees increased 16.2% to HUF 206 bln. Operating costs rose 13% to HUF 423 bln.
Write-offs and risk provisions came, however, to a negative HUF 159 bln in Q1 against a HUF 1 bln plus in the base period.
MNB said 22 banks made HUF 161 bln in write-offs and risk provisions while 11 banks released a combined HUF 2 bln in Q1. The number of banks reporting losses rose to 13 from nine in Q1 2019.
Several banks reported they set aside provisions for the full-year losses expected from the repayment moratorium in Q1. To a lesser extent a "solidarity tax" levied on banks to share the burdens of the pandemic also reduced earnings.
Consolidated total assets of the sector rose 22.2% in twelve months to HUF 53.956 trillion. Part of the increase reflected the consolidation of four foreign units of one Hungary-based bank, the MNB noted.
Net assets of the sector rose 11.3% year-on-year to HUF 5.365 tln.
The sectorʼs loan stock was up 25.7% from a year earlier at HUF 33.719 tln. The stock of deposits rose 23.4% to HUF 43.417 tln.
The ratio of non-performing loans was 4.16% in Q1 2020, down from 5.22% a year earlier but slightly up from 4.02% in Q4 2019. MNB noted that the ratio rose for the first time in many years but the rise reflected the effect of one single transaction with a foreign partner.
SUPPORT THE BUDAPEST BUSINESS JOURNAL
Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.